The federal government's long-awaited deal to sell off its money-losing nuclear reactor business is more like a perpetual partnership than a sale, leaving Canadian taxpayers stuck with the fiscal fall-out for years to come.
The government-owned Atomic Energy of Canada Ltd. has announced it has finally reached a tentative deal to sell its commercial reactor development and repair division to Quebec-based engineering giant SNC-Lavalin.
The Montreal-based company was the only suitor in the world left at the negotiating table, a fact that helps to explain why the government is effectively paying SNC-Lavalin to take over the Crown corporation.
Under the deal, SNC will pay a paltry $15 million for AECL's nuclear reactor division, plus some as yet undisclosed "royalties" on future reactor sales.
In return, the government will give SNC up to $75 million toward the development of the next generation of AECL's once internationally successful Candu reactors.
In other words, Canadian taxpayers are giving the Quebec company $60 million to take AECL off their hands.
If that were the whole deal, it would actually be a bargain for taxpayers.
AECL may be world-famous for its Candu reactors, but it hasn't sold one in 15 years, and now generates mainly massive amounts of red ink, the Crown corporation having cost Canadian taxpayers more than $820 million last year alone.
AECL's refurbishment of the Point Lepreau reactor in New Brunswick is so behind schedule and over-budget that the provincial government is demanding more than $2 billion in compensation.
In short, SNC-Lavalin is buying a money-losing, high-risk business with no sales of new reactors, and a scandalous record of fixing old ones.
In the words of Atomic Energy of Canada's president, Hugh MacDiarmid, earlier this year: "It is, in some cases, a bit of a leap of faith that somebody needs to take that we are going to be a company in the future that will enjoy growth, profitability and operational effectiveness."
Taxpayer stuck with liabilities
SNC-Lavalin isn't the only party taking a leap of faith in this deal.
Most of AECL's massive past liabilities and a lot of the financial risks going forward will remain exactly where they have always been — on taxpayers.
For instance, SNC-Lavalin will complete the current refurbishments of four reactor projects, but only "through subcontract service agreements with the government of Canada."
Translation: SNC-Lavalin will get paid for doing the work, but taxpayers will likely be on the hook for massive cost overruns and potential lawsuits that could run into the billions of dollars.
Similarly, the government's promised $75 million to complete development of a next-generation Candu reactor — called the Enhanced Candu 6 - may not be the last public cash into that project.
Under the deal with the feds, SNC is only undertaking to "work towards completing the Enhanced Candu reactor."
If that costs more than the $75 million the government is putting up, SNC could simply abandon the project — unless, of course, Ottawa ponies up some more cash.
Even if the new Candu finally comes to market, the Ontario government is already insisting that it won't be ordering any of the new multi-billion-dollar reactors unless the feds guarantee the deals against cost overruns.
Expect the same the world over — the nuclear reactor business runs on government guarantees.
SNC-Lavalin says it will be keeping about 1,200 of the roughly 2,000 employees currently working in AECL's reactor division.
Unless there is fine print in the deal we haven't seen, that means taxpayers will also be stuck with the onerous costs of giving golden handshakes to 800 scientists, engineers and other relatively high-priced AECL employees, not to mention the potentially staggering expense of transferring 1,200 public service pensions to SNC-Lavalin.
Perhaps the biggest ongoing cost to Canadians is what's being left out of the AECL deal - namely, the Chalk River research division that produces isotopes for medical scans and treatments.
The deal splits off Chalk River from the AECL reactor division that SNC-Lavalin is buying.
Over the past two years, the government has given AECL more than $170 million in special funding for the Chalk River research reactor and other facilities that produce nuclear isotopes for medical scans.
Meanwhile, AECL spent years and hundreds of millions of dollars at Chalk River building two new isotope reactors that don't work and likely never will.
Making matters worse, AECL's commercial partner in that snafu, MDS Nordion, is now suing the federal agency for $1.6 billion in damages.
Of course, if putting AECL under private-sector management successfully turns the nuclear reactor company into a commercial powerhouse, the federal government could ultimately reap a windfall in royalties from the sales of CANDU nukes the world over.
The fact the deal was announced by the government on the eve of summer doldrums suggests even the new owners of AECL aren't exactly overwhelmed with optimism.